Accounting AS · Financial accounting. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
A business can be run as a sole trader, a partnership or a limited company. A sole trader and the partners in a partnership are not legally separate from the business. They have unlimited liability, so their personal assets can be taken to pay business debts.
A limited company is a separate legal entity. It is owned by shareholders and run by directors. The shareholders have limited liability. A public limited company (plc) may offer its shares to the general public. A private limited company may not.
Every business needs finance. Match the source to the need: long-term finance for assets that last many years, short-term finance for short-term needs such as extra inventory.
Saying that limited liability protects the company. The company must pay all its own debts; it is the shareholders whose loss is limited to what they paid, or still owe, for their shares.
Answer: The instalment method costs $2,280 more, but it spreads the payments so less cash is needed now.
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